Page 190 - DCOM206_COST_ACCOUNTING_II

Unit 10: Cost Reduction and Cost Control

Notes
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Caselet Finance Leaders Consider Cost Control Top Priority

ARACHI: Most finance leaders around the world consider cost reduction,
forecasting and financial controls as their top priorities, according to a survey of
Ksenior finance professionals recently released by the Association of Chartered
Certified Accountants (ACCA) and the Institute of Management Accountants (IMA).
“These results reflect the continuing uncertainty and volatility in the global economy,
with finance leaders recognising the need for continuing fiscal constraints,” the survey
says. It is based on the input from 361 finance professionals – including Chief Financial
Officers (CFOs), finance directors, vice presidents of finance and finance controllers – from
46 countries around the world. The ACCA Pakistan spokesperson did not provide The
Express Tribune with the exact number of respondents, who participated in the survey
from Pakistan.
While nearly half of the respondents believed cost reduction was a priority for them, less
than 5% of them said the same thing about investor relations. Similarly, while over 40% of
respondents said ensuring financial controls was their priority, less than 25% expressed
the same view about following financial regulations.
“Relatively speaking, the regulatory agenda, corporate finance and tax issues are regarded
as slightly lower priorities. Investor relations are also further down the priority list, as is
corporate social responsibility reporting,” it stated.
At the top of the list of barriers inhibiting the finance function’s effectiveness is the existence
of too many priorities for the finance function: more than 35% of respondents considered
it as their primary challenge followed by a poor finance IT infrastructure, as many finance
functions continue to work across multiple Enterprise Resource Planning (ERP) systems,
spending more time manually reworking system data rather than providing insight into
the implications of the numbers for the business.

The survey revealed that nearly 55% of respondents identified financial planning and
analysis skills as their highest priority. This was followed by communication and
influencing skills, knowledge of business and understanding business risks. The survey
found that traditional finance skills, including finance technology skills, knowledge of
regulatory and external reporting requirements and specialised skills in tax and treasury,
were relatively less important for today’s finance leaders.
Perhaps the most interesting part of the survey was where finance leaders revealed who
they see as the most important stakeholders. Most of them consider customers less important
stakeholders than auditors and bankers, the survey reported. They also consider tax
authorities, government, regulators and media less significant stakeholders than suppliers
and investors, the survey revealed.

Source: http://tribune.com.pk/story/482226/finance-leaders-consider-cost-control-top-priority/
10.4 Techniques of Cost Reduction

Following are the important techniques of cost reduction:
(i) Simplification,
(ii) Standardisation,

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